Real Earnings Management Of R&D Expenditures And Earnings Persistence Of Listed Companies

Accounting earnings is the core financial indicator that investors pay attention to in making their own investment decisions.The quality of earnings directly determines the investment efficiency of investors.The high-quality accounting earnings can output effective information to the capital market,which is conducive to maintaining the stability of it.However,the problem of principal-agent brought about by the separation of powers makes managers may maliciously manipulate the accounting earnings for their own interests,so the quality of earnings is still greatly challenged.As the supervision of relevant departments becomes stricter,the risk of accrued earnings management is getting higher and higher,and more managers prefer to manipulate real activities for earnings manipulation.Under the trend of encouraging innovation,R&D expenditures as an important discretionary expense is likely to be a tool for managers to conduct real earnings management,thereby damaging the earnings quality of company.Earnings persistence is an important indicator to measure the quality of earnings,and has also attracted the attention of many scholars.However,no scholars have yet paid attention to the influence of opportunism on earnings persistence due to the manipulation of R&D expenditures as a discretionary expenseThis paper uses a combination method of literature research and empirical research.Firstly.it summarizes the literature on the persistence of earnings and the real earnings management at home and abroad,and summarizes the contributions and shortcomings of previous scholars on earnings persistence and real earnings management.There are still some problems which not get concerns by scholars,and then the subject of this paper is clarified.Next,an empirical test is carried out on the proposed hypothesis.This paper obtains the data needed from 2006 to 2017 of all listed companies in securities exchange of Shanghai and Shenzhen from CSMAR database and WIND information financial terminal.Since measuring the persistence of earnings requires the use of data from the next phase,the model for measuring values of abnormal R&D requires the use of data from the lag phase,so the sample period used in the study is 2007-201 6.The raw data obtained will be excluded from ST listed companies,financial listed companies and observation points where necessary data are missing,and then a large sample empirical test will be conducted on the research questions in this paperThis paper examines the relationship between the real earnings management behavior of R&D expenditures and earnings persistence.The conclusions of this paper mainly include:(1)The real earnings management behavior of R&D expenditures will damage earnings persistence.The greater the intensity of the upward real-life earnings management of listed company managers by reducing R&D expenditures,the worse the earnings persistence of listed companies.(2)Compared with other time periods,the negative relationship is more obvious in the period of the first two years;(3)In terms of the heterogeneity of property rights,the negative relationship is more obvious in the state-owned enterprises.This paper enriches related research of the economic consequences of real earnings management and the effect factors of earnings persistence,which helps investors to pay attention to the earnings quality of enterprises and reminds them of the possible illusions of high R&D expenditures and also reminds relevant regulatory authorities of paying attention to the discretionary expenses such as R&D expenditures and strengthening supervision and management to improve the efficiency of capital market.